Singapore economy grew 8.1% in 2004, tsunami to have limited impact

Asian Economic News, Jan 10, 2005

SINGAPORE, Dec. 31 Kyodo

Singapore's economy expanded by 8.1 percent this year in a stunning recovery from last year's economic slump triggered by the outbreak of a deadly flu-like disease in the city-state, Singapore Prime Minister Lee Hsien Loong announced Friday.

The strong growth in real gross domestic product contrasts sharply with last year's marginal 1.1 percent expansion when the economy was battered by the outbreak of severe acute respiratory syndrome.

But it is still within the government's expectations of between 8 and 8.5 percent growth this year.

The government had revised its projection for this year's growth several times from a conservative 3 to 5 percent range, predicted late last year when the economy was still reeling from the impact of SARS, to an ecstatic 8 to 9 percent range after a strong first half.

However, soaring oil prices and slower growth in the third quarter induced the government to lower its full-year projection to 8 to 8.5 percent in November.

The economy expanded by 5.4 percent in the fourth quarter of this year over the same period last year, and 2.4 percent over the third quarter of this year.

Lee attributed this year's robust economic recovery to the government's economic reform policies, such as the lowering of wage costs and the introduction of an attractive tax system, aimed at sharpening Singapore's economic competitiveness.

He said Sunday' quake and tsunami catastrophe that hit neighboring countries will have only a limited impact on the economy, and maintained the government's prediction of between 3 and 5 percent growth for the whole of next year.

''The earthquake is a great human tragedy but it is not expected to affect economic growth much,'' he said in a New Year's Eve message released to the media.

''Tourism may see a dip in the short term but the region will continue to offer opportunities for investments and economic cooperation,'' he said.

Lee said Singapore is more worried about the negative impact of an economic slowdown in the United States, one of its biggest export markets, and Japan, another key market, due to soaring oil prices and an expected downturn on global electronics demand next year. China is likely to continue to provide the engine for growth in Southeast Asia next year, despite some slowing down.

He also revealed that about 8.3 million tourists visited Singapore this year, while local and foreign investors committed over

$8 billion of fixed-asset investments in the manufacturing sector.